Friday, May 15, 2009

Recent Internet Pharmacy Fraud Cases

Presently, in the U.S. District Court in San Diego a trial is underway for some of the individuals who worked with the AffPower online pharmaceutical business. In the Affpower indictment issued on July 27, 2007, the defendants included: three physicians, two pharmacists, a pharmacy owner, an administrator and manager, two recruiters of physicians and pharmacies, a credit card processor, and eight affiliate website operators. From August 2004 through June 2006, the Affpower enterprise allegedly received over one million Internet orders for controlled and non-controlled prescription pharmaceuticals from customers in all 50 states, and generated in excess of $126 million in gross revenue. We will report on the outcome of the trial at a later date.

Here are three recent Internet pharmacy fraud cases that have been prosecuted by the U.S. Attorney's Office over the past year. These cases serve as examples of the types of case being criminally prosecuted:

Owner Of Internet Pharmacy Sentenced To 33 Months In Dallas, Texas After Plea Agreement

On March 27, 2009, Steven Rosner, was sentenced by U.S. District Judge Jorge A. Solis to 33 months in federal prison. Judge Solis also ordered that Rosner pay $400,000 in restitution and forfeit $385,721.18. Rosner pled guilty in October 2006 to one count of conspiracy to distribute controlled substances. Judge Solis ordered that he surrender to the Bureau of Prisons on July 8, 2009.

Under the plea agreement, it was stipulated that from his residence Boca Raton, Rosner set up and operated Internet Facilitation Centers (IFCs), and, to facilitate the distribution of controlled substances. Internet customers would log onto either of the sites and order controlled substances, paying by credit card, paypal, cashier’s checks, or money orders. Many of the Internet customers paid cash on delivery. Rosner, and co-defendant Rakesh Jyoti Saran, of Arlington, Texas, (formerly of Boca Raton) conspired together and with others to distribute, and possess with the intent to distribute, controlled substances to Rosner’s Internet customers without legitimate prescriptions.

Rosner admitted that he knew that the substances would be distributed to Internet customers without legitimate prescriptions and without the existence of a doctor-patient relationship. He admitted he knew that the distributions were outside the scope of professional practice and not for a legitimate medical purpose. To facilitate the conspiracy, Rosner paid several doctors, Drs. Arceli Rodriguez-Soto, Carlos Ortiz, and Maileen Lugo-Torres, all licensed and located in Puerto Rico, to approve the Internet customers’ orders.

Rosner paid Rakesh Saran to fill the drug orders through one or more of Saran’s 23 pharmacies that were located in North Texas. Once the drug orders were filled, Rosner and Saran coordinated the shipments to the drug users. Saran started filling these drug orders, which consisted of controlled and non-controlled substances, in May 2005 and continued until September 21, 2005, when he too was arrested on charges outlined in the 201-count federal indictment.

Saran pled guilty in November 2006 to one count of conspiracy to commit health care fraud and other federal offenses, two counts of mail fraud, and one count of conspiracy to distribute controlled substances. He is waiting to be sentenced by Judge Solis. He faces a maximum statutory sentence of 20 years in prison, a $1 million fine and will be required to forfeit assets earned from his illegal activities, including more than $1 million in cash seized at his residence; more than $375,000 found in bank accounts; several vehicles; and a custom home under construction in Arlington, Texas.

In addition to his own guilty plea, Saran entered guilty pleas on behalf of twenty corporations he controlled and used in the criminal conspiracy. All of the 19 individuals charged in the 201-count indictment have pled guilty and most have been sentenced. Rosner admits that the amount of controlled substances he illegally distributed through his websites, beginning in June 2004 and continuing through September 21, 2005, when he was arrested, exceeded 40,000 pills of hydrocodone (an addictive painkiller); 40,000 pills of phendimetrazine (an appetite suppressant); 40,000 pills of alprazolam (used to treat anxiety, depression, panic disorder and premenstrual syndrome); and 40,000 pills of phentermine (an appetite suppressant).

Maryland Internet Pharmacy Owners Sentenced After Trial to Five Years in Prison and Ordered to Pay Over $11 Million for Illegal Internet Sales of 10 Million Hydrocodone Pills

On January 12, 2009, in Baltimore, Maryland, Chief U.S. District Judge Benson E. Legg sentenced both Steven Abiodun Sodipo and Callixtus Onigbo Nwaehiri to five years in prison followed by two years of supervised release for illegally selling 9,936,075 pills or dosage units of hydrocodone over the Internet, conspiracy to launder money, engaging in monetary transactions using the proceeds of the illegal drug sales and filing false tax returns. The sentence was after a 6-week trial.

Sodipo and Nwaehiri were pharmacists and owners of NewCare Pharmacy located in Baltimore City, Maryland. Judge Legg also ordered Sodipo and Nwaehiri to each pay $11,870,119.39, the amount of gross proceeds derived from the illegal sale of hydrocodone by NewCare Pharmacy from January 2005 to October 2006, and, in order to satisfy such money judgment, the defendants were ordered to forfeit their homes, seven cars, monies held in 33 bank accounts and a business property owned by Sodipo. Newcare was Maryland's number one distributor of the highly addictive opiate hydrocodone, via the Internet.

According to testimony presented during the six week trial, Sodipo and Nwaehiri owned and operated NewCare Home Health Services, Inc., which did business under the name of NewCare Pharmacy. Beginning no later than sometime in 2004 through October 10, 2006, Sopido and Nwaehiri joined a nationwide conspiracy to illegally sell hydrocodone through the Internet to any customer with a valid credit card. Specifically, they engaged in agreements with web-site operators to fill hydrocodone prescriptions e-mailed to them that were signed by a small group of doctors and were for individuals all across the country. The doctors, who never saw or spoke to customers, routinely authorized the prescriptions, which were then wired to NewCare for filling and shipment. In return, NewCare was paid $20 for each prescription it filled and shipped.

Witnesses testified that Sodipo and Nwaehiri knew that 88% of all “prescriptions” filled by NewCare were for hydrocodone, that most prescriptions were issued by doctors located in Florida, that the patients were in all 50 states and D.C., and that there was no doctor patient relationship. From January 1, 2005 through October 10, 2006, NewCare purchased 9.9 million dosage units of hydrocodone, when the national average was under 160,000 units per pharmacy. Hydrocodone is a dangerous and highly addictive narcotic painkiller. Moreover, the evidence showed that Sodipo and Nwaehiri continued to sell vast quantities of hydrocodone knowing that some of their customers were addicts.

Chief Judge Legg determined at the sentencing hearings that the nationwide conspiracy to illegally sell hydrocodone over the Internet involved over 50 pharmacies, doctors and physician assistants, and totaled sales in excess of $108 million.

Guilty Plea from Kentucky Doctor who Prescribed Controlled Substances Over the Internet

On April 9, 2009, Tufan Senler a physician in Louisville, Kentucky, pled guilty before U.S. District Judge John G. Heyburn II, to dispensing and distributing controlled substances, exporting controlled substances to foreign countries without a permit, money laundering, and misbranding of drugs. Senler pled guilty to all five counts charged in an Information filed on March 10, 2009. The information alleges that between 2002 and 2005, Senler, a physician, sold diet prescription drugs over the Internet through his website

According to information contained in Senler’s plea agreement, Senler operated two businesses, Kentucky Body Works, and Science of Better Living. Senler admitted that he dispensed, distributed and exported diet prescription drugs through his website to customers who did not have valid prescriptions. He further admitted he did not engage in a legitimate doctor-patient relationship since he had no face-to-face contact with the customers who ultimately purchased the drugs. The prescriptions issued through the website were not consistent with the professional practice of medicine and were being provided outside the standards of legitimate practice of medicine. Finally, the drugs issued were not issued in compliance with Food and Drug Administration requirements, and thus they were adulterated and/or misbranded.

Senler also admitted that at no time during the relevant time period did he have a valid exportation permit issued by the Attorney General of the United States to dispense or distribute controlled non-narcotic drugs to other countries. Additionally, Senler admitted that he engaged in monetary transactions with the proceeds of this illegal activity. Customers’ deposits were placed into a Kentucky Body Works’ bank account and then subsequently transferred to Senler’s personal bank account. Some of these proceeds were used to make several purchases of property. Senler admitted that he received approximately $15 million from his role in the above offenses. Senler faces a maximum penalty of 21 years in prison and a fine of over $6.7 million when he is sentenced by Judge John G. Heyburn, II, on July 8, 2009.

Attorney Comments. These cases are a high priority for the DEA and federal and state government agencies. Notwithstanding the prosecutions, Internet pharmacies abound. Even companies that do not distribute controlled substances need to comply with all federal and state laws when prescribed drugs are being shipped to patients or customers who have not been evaluated by a physician and who do not have a physician-patient relationship with the prescribing physician.

Remember, the fact that an online business is large will not prevent it from being prosecuted. Each individual who becomes involved in an online pharmacy needs to assess the legality of the operations and whether they face criminal or civil exposure. We expect to see more prosecutions in the next couple of years.

Any questions or comments should be directed to: Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.


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